Gold Price Forecast: XAU/USD eyes Fed Minutes for fresh impetus after holding $4,100
- Gold is fading the previous rebound in Asia on Wednesday, struggling near $4,150.
- US Dollar bounces in sync with Oil prices and US Treasury yields ahead of FOMC Minutes.
- From a short-term technical view, Gold remains a ‘sell-on-bounce’ trade.
Gold is back in the red around $4,150 in Wednesday’s Asian trades, reversing the previous rebound from nine-week lows near the $4,100 key level.
Gold stays rangebound as FOMC Minutes loom
Despite the renewed weakness, Gold maintains its two-week-old range between the $4,200-$4,100 zone.
The bright metal is torn, with receding bets on a US Federal Reserve (Fed) October interest rate hike, strong central bank purchases, and global debt and political concerns on one hand limiting the downside.
China's gold reserves stood at 77.47 million ounces, or about 2,409.59 metric tons, at the end of September, up 740,000 ounces, or about 23.02 metric tons, from the end of August.
On the other hand, energy-driven inflation risks and elevated US Treasury bond yields, and hence the US Dollar (USD), keep Gold undermined.
Over the past fortnight, which of these two scenarios plays out has likely determined Gold’s near-term price action, with the overall bearish sentiment intact as inflation fears continue to reinforce hawkish Fed expectations beyond the October monetary policy meeting.
Markets are pricing in a roughly 70% chance that the Fed will hike rates in December, according to the CME Group’s FedWatch Tool.
The odds of an imminent rate hike have been priced out after the Fed’s favorite inflation gauge was benign and September Nonfarm Payrolls (NFP) numbers disappointed.
Analysts at BNY Markets highlight that, “turning to monetary policy, last week we witnessed a bit of a pivot in the market’s expectations for an October hike,” as softer data and recent Fed communication have tempered near-term tightening bets. They caution that “that doesn’t mean that the December hike odds have shortened significantly,” but “we now expect the second hike of this cycle at the end of the year.”
Later in the day, with no major US economic data on the docket, focus will remain on the Minutes of the Fed’s September monetary policy meeting, US weekly Crude Oil Stocks Change data, geopolitical developments in the Middle East, and US Treasury bond yields for fresh trading impetus in bullion.
Meanwhile, Xinhua News Agency reported on Wednesday that Yemen's Houthis struck ballistic missiles and drones on an airbase in Saudi Arabia's Khamis Mushait. This news is helping Oil price recovery alongside risks of a hurricane in the US.
Gold price technical analysis: Daily chart
In the daily chart, XAU/USD trades at $4,139.40, retaining a bearish near-term bias as it remains below the 50-day, 100-day and 200-day simple moving averages (SMAs) at $4,332.12, $4,267.61 and $4,530.95, respectively. This alignment of price under all key SMAs suggests the broader uptrend is under corrective pressure, while the Relative Strength Index (14) around 39 keeps momentum mildly negative but shy of oversold territory, hinting at downside risk as long as the metal fails to reclaim the shorter-term averages overhead.
On the topside, initial resistance is seen at the 100-day SMA at $4,267.61, followed by the 50-day SMA at $4,332.12 and then the 200-day SMA near $4,530.95, where a sustained break would be needed to ease the current bearish tone. On the downside, the next meaningful structural floor aligns with the rising support trend line, with a reference around $3,999.07, where a daily close below this area would likely extend the corrective phase and open the way to deeper retracements.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
